No. 134.
Mr. Denby to Mr. Bayard .

No. 260.]

Sir: I have the honor to report that American merchants doing business at the ports of Takow and Anping, in Formosa, have presented me the following question through the consul at Amoy.

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It seems that the local authorities in Formosa levied an enormous lekin tax on native produce. The people refused to pay the tax and threatened to discontinue planting. The authorities then concluded to collect this tax from the foreign merchants after the produce (in this case sugar) had reached the go-down of the merchants. The foreign merchants refused to pay this tax on the ground that it was really an export tax and contrary to the treaties.

I have presented this question to the Tsung-li yamên fully, as you will see by a copy of my communication which is herewith inclosed.

I will communicate the answer when the same is received.

I have, etc.,

Charles Denby.
[Inclosure in No. 260.]

Mr. Denby to the foreign office .

Your Imperial Highness and Your Excellencies:

I have the honor to inform your Imperial highness and your excellencies that a question of some importance has been presented to mo by American merchants doing business in Formosa, through the United States consul at Amoy. I beg leave to state the same to your imperial highness and your excellencies, and most respectfully to ask your interposition in order that justice may be done.

The treaty of 1858 between China and the United States fixes an export duty on sugar as follows: “Sugar, brown, per 100 catties, 1 mace 2 candareens; sugar, white, per 100 catties, 2 mace. The treaty provides that this tariff shall henceforward and until duly altered under the provisions of treaties be in force at the ports and places open to commerce.”

If the foreign merchant brings native produce down from the interior under transit passes, he pays one-half duty, which payment exempts the goods from all charges on route. But if he buys the goods in the open ports from the producer, the rule has been to pay only the export duty. Now it happens that in the island of Formosa the local authorities imposed a lekin tax on all produce, amounting, I am informed, to from 10 to 15 per cent. on the value of each article.

The collection of this enormous tax was resisted by the producers, who refused to pay it and threatened to discontinue planting if it was insisted upon. The local authorities then abandoned the collection of this tax in the interior and concluded to collect it at the port of shipment from foreigners. For that purpose they established lekin stations at the port of Takow and Anping (a port of Vainanfu). The collection of such a tax was justly regarded by the foreign merchant as the imposition of a new export duty. It seems that the British consul, who is also consular agent of the United States, Mr. Warren, arranged with the local authorities that until the final decision of the high authorities at Peking on the legality of this tax, the goods might be shipped by giving bond guarantying the payment of the tax, should it be decided that such a tax could be levied within the limits of a treaty port. If the local authorities for any reason find themselves unable to collect lekin on the produce while it is en route, this inability furnishes no reason why the foreign merchant, after he has bought the goods and has them in his godown, should pay this tax.

If it is competent for the local authorities to levy what lekin they please, it becomes clearly impossible for the foreign merchants to do business at all. If he is liable to pay this tax he would never know how much his goods would cost him.

I am informed that the lekin tax levied in Formosa, is for white sugar, No. 1, 40 cents per basket of 132 pounds; and for brown sugar, No. 1, 20 cents per basket of 132 pounds. Taxes on Nos. 2 and 3 are proportionately larger. Since the bond system was agreed on the taxes have been largely increased. There is no means of knowing to what amount the tax may be hereafter increased. This uncertainty is very detrimental to trade.

The sugar season is now about to open, and it is important that the question of the liability of the foreign merchants to pay lekin on sugar in the two ports should be Bottled.

I therefore submit the whole question to your Imperial highness and your excellencies, hoping that you will do justice in the premises.

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I respectfully request your Imperial highness and your excellencies to make an order that native products which have been bought by the foreign merchants shall only he required to pay the regular export duty, and shall not he required to pay lekin taxes.

I have, etc.,

Charles Denby.